How to Divorce Your First Card

As people age they tend to hold on to cards despite their high fees or lack of valuable rewards. Millennials between ages 24 and 39 have about three credit cards on average, whereas baby boomers have an average of four to five, according to 2020 data from Experian.

Some people may be considering letting go of a card after paying down their card debt during the pandemic or realizing that the rewards of a certain card are no longer useful. Here’s what you can do about your fruitless card and what you need to know about the process.

Break Up, but Get the Upgrade

While your first card might not be doing much for you in rewards, it doesn’t mean you have to throw it all away.

Keeping your first card allows you to keep your credit limit intact and your utilization (the percentage of credit you use) lower. Closing the card account could mean tossing out some of the positive credit benefits.

Ted Rossman,

senior credit card industry analyst at Bankrate.com, said he wouldn’t encourage people to pay an annual fee just to keep a card open that they don’t use or benefit from. He instead suggests calling the company to see if they can switch you to another card that has a lower annual fee (or no annual fee), or one that has rewards that are a better match for how you spend your money.

Customers need to phrase it as a “product change” when they call the card company. A product change involves getting a new card with the same card provider and it typically allows a cardholder to keep everything else the same, including the account number and available credit.

When you call, confirm with the credit card company that your credit history will be rolled over to the new card. This will ensure all the good credit information carries over and can continue to be built upon. With FICO scores—a score that quantifies the likelihood that a borrower will repay money on time—a closed credit card account that was in good standing can stay on your credit report for up to 10 years, meaning the good information follows you.

In addition, card companies often won’t do another hard credit check when they do a product change and it won’t affect a person’s credit score.

“This is a good way to kind of seamlessly transition from one thing into another one that fits you better,” said Mr. Rossman.

One drawback to this strategy is that it usually doesn’t result in a signing bonus—such as points or perks—that are common with new card accounts, but preserving your credit history is enough of a perk.

Just Letting Go

Timing matters when you’re closing a credit card.

Canceling a card and altering your credit utilization around the time of applying for a loan or a mortgage could affect your credit and eligibility. Wait until after you are approved for a loan to make any changes to your cards. Lenders don’t like to see variability when looking at your credit, said Mr. Rossman.

“Many people may not be aware that canceling a credit card hurts your credit score,” said

Jill Gonzalez,

an analyst at WalletHub. “When you close a credit card, the total amount of your available credit drops. This in turn causes your credit utilization ratio to rise, which is bad for your score.”